CREATING WEALTH IN TOILET TISSUE PRODUCTION

CREATING WEALTH IN TOILET TISSUE PRODUCTION

A WORKABLE BUSINESS PLAN
 PREPARED BY 
UDEME U. UDO

SUMMITTED TO THE
NIGERIA BUSINESS INITIATIVES

AN ENTRY FOR THE

INAUGURAL ANNUAL BUSINESS PLAN COMPITION

August, 2009.


TABLE OF CONTENTS

CONTENT                            PAGE
Introduction
CHAPTER 1
1.10        Business Description
1.11          Business Goals
1.13        Return on Investment
1.12            Equity Structure
CHAPTER 2
2.0        Sources of Fund
2.10    Operating Cost
2.11    Projected Takes off Capital
CHAPTER 3
3.0        Management Team
CAPTER4
4.10        Market Size
4.11        Competition
4.12        Future Trend
CHAPTER 5
5.0               Manufacturing Process
5.10           Raw Materials
CHAPTER 6
6.0                   Marketing Strategy
6.10           Prospecting Customers
6.11        Distribution Policies
6.12    Promotion Method
6.13        CONCLUSION
6.14        RECOMMENDATIONS
REFERENCES




















INTRODUCTION

The Federal Government of Nigeria included toilet roll of any type amongst other in the import prohibition list.
That means that this year 2009 and beyond, no foreign toilet paper, serviette or face tissue would be imported into this country.
This government policy is in the right direction.
The marginal propensity to consume in third world countries is very high. This leads to low savings, low capital formation, low investment and low productivity. The end results are the vicious circle of poverty, which without sounding a false alarm, is the picture of Nigerian economy.
In order to break this vicious circle of poverty a meticulous identification, evaluation and appraisal of viable projects in terms of small capital outlay, local raw materials availability, cheap manpower requirements and availability of sustainable high market demand, low but nonetheless appropriate technology, employment generation and incremental gain among others, have been carried out by this writer. The end result is that toilet roll production, even at a small-scale level fits well the technologically, the payback period short and economically very viable if properly managed.
This brief write up seeks to enlighten any interested investor, businessman on what it takes to set up a profitable toilet roll manufacturing plant.







CHAPTER 1
1.10    BUSINESS DESCRIPTION
Tender Rose Tissue Paper  will commence business in January 2010 as the division of Udemsco Industries Ltd. (UIL0. UIL decided to commence tissue paper production in Abuja or it environ because of the gap between Demand and supply of the commodity to the ever expanding Abuja city.

1.13    Business Goals
Udemsco Industries Ltd is in the business of Toilet Tissue paper and serviette production. The company Objectives is to expand local tissue paper production by processes the products for direct consumption and commercial needs. The company utilizes local raw materials in the country process package and sell it as a finished production of high quality.

Our Goals includes but not limited to the following
    Starting Small and latter growing it capital into a big conglomerates through hard work and high quality products.
    To create employment for our unemployed youths
    To boast local production of direct consumable goods in the country
    To becomes the largest tissue producing company on a long run.
1.13    Return on Investment
Generally and based on experienced, establishing and running a toilet roll factory is very lucrative if due diligence is given to good management practice. From an input of 250 metric tones of jumbo reels and after making allowances for expected wastages, and operating at 40%m utilization capacity, gross profit before tax of N31.8 million would be made within first year of the business. Deducting annual operating cost of 14.7 million, profit before tax of 17.1 million would be recorded in the first year of operation. Deducting the annual taxation of 2.2million, net profit after tax of N14.96 million would be recorded.
Further analysis of the investment revealed that percentage return on sales would be 62.7% while percentage return on investment would be 137.0% (as shown below).
This is not considered bad at all given the prevailing economic climate.

FORECAST STATISTICS:
Assuming the sum of 16 million is invested
Period ended December 2010    2010    2011
    N,000    N,000
Turn over    31,180    54,006
Profit before Tax    17,100    27,003
Profit after tax    14,960    20,230
dividend payout    5,984    8,123
Forecast Statistics       
Earnings per share (Kobo)    93.5    130
Dividend Per Share (Kobo)    37.4    94
Earnings Yield     93.5    162
Dividend Yield %    3.74    0.94
P/E ratio        


1.14    Equity Structure
The company will commence business in 2010 with initial share capital of N5 Million comprising of five million ordinary share of N1 each which shall be issued and fully paid up. By January 2010 the share holding structure of the company will be as follows:
Year    Authorized (N,000)    Issued and Fully paid up (000)    remark
2010    N5.000    N5,000    cash




















CHAPTER 2

2.0        Sources of Fund
The company share shall issued all her and shares to willing but limited share holders to the tune of N5,000,000 (Five Million Naira Only) while the other fund will be source from bank and other financial institutions.

2.12    Operating Cost
The sum of N15, 702,000 will conveniently set up a toilet/tissue rolls plant to produce 5 million toilet rolls per annum. With the possibility of the price dropping if there is an existing accommodation


2.13    Projected Takes off Capital
The sum of N16, 000,000 will conveniently set up a toilet/tissue rolls plant to produce 5 million toilet rolls per annum with all the equipments taken into consideration













        CHAPTER 3
3.0        Management Team
The board of the company shall compose of six members made up of two Executive directors and four Non Executive Directors: the board members shall be professional’s entrepreneurs with vast experience and credible track records.




















CHAPTER4
4.10        Market Size
My recent research findings reveal woeful supply inadequacy vis-à-vis demand for toilet rolls thus creating a gap yearning for quick satisfaction. Nigeria alone needs over 950 million toilet rolls per annum out of which local suppler through production meets only 150 million. This enormous demand supply gap translates into a viable investment opportunity for any entrepreneur that exploits it. For such a determined investor, the illusion created by the sight of many people hawking toilet rolls of various types and their packing in stores and warehouses should be discarded as it doesn’t portend market saturation but rather that the products is in high daily demand. To confirm the veracity of this assertion, one needs to go observe the many lorry loads of toilet rolls being carted away daily from the warehouse of major distributors.
Enterprising traders from ECOWAS daily besiege Lagos markets in search of toilet rolls and other toiletries.
Their bulging lorry loads of merchandise as they speed home to and sell and come back bear an eloquent testimony to this.
4.11        Competition
Do I hear you say: does it mean that I will not have competitors?  Of course you will have; there is competition even if you have only two producers or service produces. But the assurance in toilet roll production is that the prevailing competition is not such as will rock the boat.
You are on a safe landing coast based on our experience and research funding.

Given the above scenario, if the current demand supply gap of 800 million toilet rolls per annum is to be filled, all things being equal, it means that not less than 160 additional toilet roll producing plants of the same capacity as above will have to be established (by straight forward arithmetic. Ideally, this should be slightly, less for obvious reasons) and kept running daily nationwide.

4.12        Future Trend
Udemsco industries Ltd will in the near future explore the possibility of expanding it products to cover the entire country and further look beyond the local market to the ECOWAS countries. To take advantage of the Ecowas free trade zone.

The company also intends to diversify it investment into other relevant business area by grabbing every opportunities that may offer good returns on investment to the company’s share holders














CHAPTER 5
5.0               Manufacturing Process
The relevant machinery and equipment, all of which are obtainable locally are:
1.    CORE CUTTING MACHINE
2.    GLUING MACHINE
3.    JUMBO REEL WINDING MACHINE
4.    BAND SAW CUTTING MACHINE

These have been tested, found to be reliable, rugged, long lasting and high performing by those who have been using the plant. The equipment supplier grants guarantees of 3 years for their performance, will install, and test run the plant It should be noted that these machine can also be imported from some tested foreign machine producers on request.

The rated daily input is one metric tone of jumbo reel. This gives an output of 20,000 2-ply toilet rolls. This means that if you work 250 days a year, will turn out 5 million toilet rolls or 180,167 packets of 4 dozen each. If this seems too small it can be the machinery or work on two shifts or a combination of both.

In terms of factory space, a three bedroom space or duplex is ideal to house both the plant and raw materials. Of course factory can build when contemplating a bigger plant. Or hire a warehouse type of accommodation.

After selection and purchased of good quality jumbo reels, received and stored, the production of toilet rolls involved the following brief processes;
First the core paper is fed into the core making machine from two different rolls and glue applied. The core pipe length is determined and cut. Jumbo reels are fed into the jumbo reel – making machine with the core pipe from the core-making machine. The jumbo reels sheets are wound or wrapped round the reel to be made. The jumbo reel sheets are wound or wrapped round the core pipe automatically by the reel to be made.

This is now sent to be band-cutting machine where the toilet roll tissue paper is cut into desired market sizes.

The cut toilet rolls are then manually wrapped, packaged in cellophane wraps, stamped and sent to the store ready for sale.

5.10   Raw Materials
The essential raw materials needed are the jumbo reels, core paper and white glue while the packaging materials are the wrapping paper on which the producers name, address and brand name will be conspicuously printed, cellophane, staple pins etc.
Each of these is obtainable locally from suppliers. The jumbo reels are either pure white or off white.
Pure white sells for between N180,000 and N185,000 per tone while off white sells currently between N135,000 and N140,000 depending on your source. From each jumbo real, one can produce 20,000 double ply toilet rolls in an ideal situation.




CHAPTER 6
7.0                   Marketing Strategy
The company into to use direct marketing to major shops and distributing agent across the country indoor to fairly and effectively market it product. This will be achieve by paying attention to the packaging and high quality product from the factory.

6.10           Prospecting Customers
Toilet rolls are consumed on daily basis by all and sundry irrespective of age; social class or religious divide for sanitary and cleansing purposes.
They enjoy high aggregate demand in places like households, hotels, schools, hospitals, and various types of institutions, parties of sorts, canteens, churches and mosques. Others are maternity homes, night and other clubs, shopping and food selling centers, offices etc. The beauty arsenals of any lady are not properly assembled and deployed without a toilet roll, a permanent of their handbags; can you imagine a world without toilet rolls?
Toilet rolls have a high repeat sales tendency which is fuelled by such factors as increasing social and sanitary awareness of the heed for hygienic and good quality living standard, geometrically exploding population, continued drift from the rural to the urban centers in search of the better things of life and job opportunities, affordability of the product price etc.
The market for toilet rolls has been well established and developed. It is large, expanding and sustainable.
The country’s population, which was estimated in 2005 to be in the neighborhood of 150 million, grows at an annual rate of 2.831%. In addition the ECOWAS has about 350 million people with similar growth rate.
What this translates into is that any ventures into this lucrative toilet roll production business will tap into the already existing and expanding local and export markets.

6.11        Distribution Policies
The company will employ the services of advertising agent to promote it product, thereby establishing the product as a major brand in the market. This is to ease the work of the distributors which will spread across major towns and city across the country. We believe that in no distance time the brand haven achieve its goal of producing tissue of high quality at affordable rate will grow to become a major player in the industry.

6.13    Promotion Method
The company, in her quest to build an outstanding brand shall deploy the services of advertising agents to advertise it products. More so, it will cultivate the habit of setting aside reasonable percentage of its profit for promotion and advertisement to boast its output.

CONCLUSION
Following the outcome of this research we are optimistic that an investment in this direction offers good returns to any investor or entrepreneur who venture into it. As return on investment will be realize in the first years with reasonable profit inspite of the unfavourable investment challenges and the high cost of doing business in the country today

RECOMMENDATIONS
Base on the above the following recommendations are made.
    That tissue paper production if adequately manage will offer good to investors  that investors
    The services of experienced man-power should be sort to avoid unnecessary misstate on the part of the labour.
    That not more than five labour should be use in the first year of production.
    Further analysis of the investment revealed that percentage return on sales would be 62.7% while percentage return on investment would be 137.0% (as shown below).

This is not considered bad at all given the prevailing economic climate.





















REFERENCES
1.    Stocchi E. (1990), Industrial Chemical Volume 1, English Editon EULLISHORWOOD Ltd. California
2.    Albers, Henry H. (1974) Principle of Management (4th Ed.) New york: John Wiley.
3.    Ubeku, A. K. (1975) Personnel Management in Nigeria Benin City: Ethoipe Publishing Corporation,
4.    Uba Godwin (2009) ThisDay Newspaper, Abuja, Leaders & Co Ltd.